Booyoung Group Chairman Lee Joong-keun appears at the Seoul Central District Court, Tuesday, to attend a hearing to determine the validity of an arrest warrant request for him on multiple criminal charges. / Yonhap

Builder under one man's control facing leadership vacuumBy Park Jae-hyukBooyoung Group Chairman Lee Joong-keun was taken into custody this week over alleged tax evasion, embezzlement and several other crimes.The arrest of the 77-year-old businessman is expected to place the builder in the worst crisis in its 35-year history.Lee has alleged to have made unreasonable profits by fabricating prices of rental houses. He also faces allegations of giving his brother-in-law 20 billion won ($18 million) in severance pay and forcing the group's subcontractors to overbid, so that his nephew's company could win contracts.The prosecutors filed for an arrest warrant last week on criminal charges including alleged embezzlement, malpractice, tax evasion and violations of the fair-trade and rental housing acts.After declining to answer summons several times, Lee appeared at the prosecutors' office twice.He denied the allegations, but could not avoid the detention.Judge Kwon Soon-ho at the Seoul Central District Court cited possible destruction of evidence and legal grounds to believe that the chairman may be guilty of major charges as reasons for his approval of the arrest warrant.Business riskThe chairman's absence has caused a leadership vacuum at the nation's 16th-largest conglomerate, considering that he has sole control the group.Lee holds a 93.79 percent stake in Booyoung, the group's holding company. He also has the most shares in the group's 24 subsidiaries, all of which are unlisted companies. Based on the large numbers of shares, he has exerted strong control over the group and its subsidiaries.Lee has made most of the group's important decisions, including the investment of 3 trillion won in purchasing buildings. Booyoung bought Samsung Life headquarters building in Seoul and several buildings in Seoul and Incheon over the past three years.His children and professional managers have only played minor roles. Lee's oldest son holds a 1.64 percent stake in Booyoung.Industry officials said therefore that the construction firm will face setbacks in its businesses, after the arrest of the sole decision maker.They are pessimistic about prospects of Booyoung's house rental business that it has focused on. Given that the chairman has been accused of profiteering by overpricing houses, observers expect the company will find it difficult to expand the business.Moreover, the buildings that the company has aggressively purchased are facing declining profits. It may have to sell the buildings, but no one will be able to make the decision without Lee.Tarnished corporate imageEven if the chairman is found not guilty, it will take time for Booyoung to improve its corporate image.Although the entrepreneur is regarded as a self-made man and his company is recognized for its large donations, most people have a negative view on the chairman and Booyoung.The company has been said to have received preferential treatment from the National House Fund. It has grown into Korea's 16th-largest firm over 35 years, after tapping into the house rental business that most builders disliked due to its low profitability.Lee was also sentenced to five years of probation in 2008 over charges of embezzling 27 billion won, evading taxes worth 7.4 billion won and giving billions of won in bribes to a high ranking official at the tax authority. He was temporarily detained in custody at that time.During the previous President Park Geun-hye's term, his company was investigated for tax evasion as well. The chairman allegedly "donated" 7 billion won to the scandal-marred K-sports foundation owned by Choi Soon-sil, a close confidant of the former President.Booyoung was also embroiled in controversies over poor quality construction.Residents of Booyoung's apartments in Hwaseong, Gyeonggi Province, claimed they found 90,000 defects in them. Gyeonggi Province Governor Nam Kyung-pil called for a business suspension and liquidation of Booyoung.Against this backdrop, the company was excluded from a meeting between President Moon Jae-in and conglomerate leaders at Cheong Wa Dae. Instead, Lee met the President last month as a chairman of the Korean Senior Citizens Association, during a luncheon held there.Lee has represented the nation's senior citizens, after being inaugurated as the association's chairman last year.In 2016, Booyoung posted 1.6 trillion won in sales and 334.8 billion won in operating profit. Since its establishment in 1983, the company has offered rental houses to 203,000 households over the past 30 years. It ranked 12th in construction capability last year. The company has 24 subsidiaries including ones in the United States, Cambodia, Laos and Vietnam.